Housing Rebound Is Providing Bigger Boost to U.S. Labor Market

Construction hiring jumped in
February by the most in almost six years, highlighting the
benefits to the U.S. economy from a revitalized housing market.

Builder payrolls surged by 48,000 workers, the most since
March 2007 and the ninth straight increase, Labor Department
data showed today in Washington. The gain accounted for 20
percent of the 236,000 increase in total employment. The jobless
rate fell to a four-year low of 7.7 percent.

Orders at builders including D.R. Horton (DHI) Inc. and Hovnanian
Enterprises Inc. (HOV) are spurring demand for contractors -- from
electricians and roofers to plumbers and masons. The industry
that was at the center of the financial crisis has emerged as an
economic bright spot as Americans take advantage of cheap
borrowing costs and improving access to credit.

The construction gains are “a very positive sign,” said
John Silvia, chief economist at Wells Fargo Securities LLC in
Charlotte, North Carolina, a unit of the largest U.S. mortgage
lender. “The overall flow of the economy is really improving,
and I’m encouraged that housing is continuing to kick in.”

Silvia estimates as many as 30,000 construction workers a
month will find jobs in the next year. The industry, which
includes homebuilding, commercial building and civil
engineering, took on 154,000 workers from September through
February, the strongest six months gains in employment since the
period ended April 2006.

Specialty Trade

Payrolls at specialty-trade contractors, who perform work
such as pouring concrete and installing electrical wire, have
climbed 106,000 in the last six months, accounting for about 69
percent of the gain in total construction employment.

In residential building, payrolls totaled 577,500 in
February, the most since June 2010, according to Labor
Department data.

D.R. Horton, the largest U.S. homebuilder by volume, said
in January its homebuilding revenue for the quarter rose 39
percent from a year earlier to $1.23 billion. Orders jumped 39
percent to 5,259 homes. The Fort Worth, Texas-based company’s
contract backlog, an indication of future sales, rose 80 percent
to $1.76 billion.

Red Bank, New Jersey-based Hovnanian, the largest
homebuilder in the Garden State, said this week that net
contracts climbed 25 percent to 1,344 homes. The company’s
contract backlog rose 33 percent to 2,301 dwellings.

Growing Demand

“Population is up, sentiment about buying homes is up,
households are unbundling, creating demand for housing,” Larry Sorsby, executive vice president and chief financial officer,
said at a Feb. 26 conference. “Consumer confidence is rising,
rents are rising. So people are more anxious to buy today than
they were a year ago and we think that trend is going to
continue.”

“There’s typically a lag between housing starts and
construction jobs of just over a year,” said Michelle Meyer,
senior U.S. economist at Bank of America in New York. “There’s
often capacity to handle the initial turn.”

Purchases of new homes, logged when contracts are signed,
jumped in January to a 437,000 annual pace, the strongest since
2008, according to Commerce Department data.

Gains in homebuilding ripple through the economy,
contributing to job growth beyond the industry. Each single-
family home built creates one year of work for three other
workers and a multifamily unit provides work for one, according
to David Crowe, chief economist at the National Association of
Home Builders in Washington. The calculations include
occupations such as mortgage lending, architects, and
manufacturers of household goods.

“Subcontractors feel comfortable that they can hire
because there will continue to be homebuilding work available,”
Crowe said. “There had been a hesitancy given how long it’s
taken to get the industry functioning, to believe the recovery
is credible and here to stay.”